Question

U.S. households have a range of financial investment options: bank accounts, certificates of deposit, bonds, stocks, mutual funds, housing, and even tangible assets like gold. In choosing between these alternatives, the expected rate of return, risk, and liquidity of each kind of investment will play a role.

Answer 1

Correct Answer:

True

It is the strength, depth and trade volume across the US capital market that has come up with different types of financial products for investments. Besides, real estate market and physical commodities such as gold and other precious metals are used for holding and trading. It has given birth to the commodity trading with commodity based derivatives. Though, the investors invests in these investment products on the basis of risk, return and liquidity profile that varies due to age, as well as degree of propensity to take risk. A risk averse person wants investment with minimum risk even if it gives low return. But, risk loving person invests for higher return even if it comes at a high risk. A neutral person wants a balance between risk and return. It has led the analysts to build efficient frontier an help investors to chose a return at a particular risk level.